Depreciation Policy Research Articles

Development and Trends of Depreciation Policy in Slovak Republic

Research background: Depreciation as such represents a significant component of business costs. It is known that in the current legislation in the Slovak Republic there was no depreciation in the depreciation group with a depreciation period of 2 years. As part of increasing the motivation of the business sector to procure low-emission or emission-free transport, an amendment to the Income Tax Act was adopted with effect from the beginning of 2020, which introduces a new depreciation group 0 and favours the depreciation of electric vehicles. The newly introduced depreciation group zero has a strong ecological subtext. Purpose of the article: The article deals with the development of depreciation policy in the conditions of the Slovak Republic, compares the current situation with the situation in the Czech Republic and on the example of practical calculations of depreciation. The aim of the paper is to compare current trends in depreciation policies in the context of supporting the greening of transport. Methods: We used methods of analysis and comparing. Findings & Value added: Based on an extensive analysis, the article maps the most significant changes in the depreciation policy. Within the historical development of today’s tax depreciation, several trends are manifesting that are favourable for the business environment. The depreciation policy in the Czech Republic has not undergone such extensive changes as in Slovakia, where the most recent change in the recent period is the introduction of a depreciation group with a depreciation period of 2 years.

METHODS OF ACCOUNTING FOR THE PROCESSES OF REPRODUCTION OF FIXED ASSETS OF THE ENTERPRISE AS A SOURCE OF INTERNAL INVESTMENT FOR THE ENTERPRISE

The article is devoted to the research of current state of amortization policy in Ukraine. The article examines depreciation reforms carried out starting from 1997 up to the present time and makes the conclusion that they only brought the national depreciation policy closer to the countries with the market economy, but the real accumulation of funds for fixed assets was not achieved. Consequently, depreciation allowances are not only unable to stimulate the development of the economic entity, and are not able to even provide simple maintenance of basic (even manufacturing) facilities, which leads to their depreciation, and money for renovation or repair is not. In the work is stated that the use of a particular method of accrual of depreciation of fixed assets is appropriate to choose depending on the corrosiveness of the management functions, the objectivity, etc. The result will be to achieve the maximum effect from the application of the appropriate method of accrual of depreciation. The end result will be willingness of the subjects of management to the production of products (services). Examining current amortization policy, which was formed at the present stage of economic development in our state, continues to be ineffective. In our view, the current amortization policy does not fulfill its main function - motivation to the real accumulation of funds for renewal of worn and morally and technically outdated main assets of the enterprise. Today no company is not able during the regulatory period of service of fixed assets to offset their costs for their renewal, but for the need for renewal. We believe that the feasibility of choosing a method of accrual of depreciation must be carried out taking into account the correlation for the management functions, the objectivity and feasibility of use by a particular entity of management. Our proposed mechanism for selecting the optimal depreciation policy by the management of the enterprise, based on the real accumulation of "real" money can be a source of internal investment for renewal and renovation of basic assets of the state. The obtained results of the research is relevant in an environment where the deterioration of the basic equipment of enterprises is sometimes up to 90%, and the necessary funds for renovation and repair of the basic equipment of the enterprise.

ОБЛІКОВО-АНАЛІТИЧНЕ ЗАБЕЗПЕЧЕННЯ ОПЕРАЦІЙ ІЗ НЕОБОРОТНИМИ АКТИВАМИ В СИСТЕМІ ФОРМУВАННЯ І КОНТРОЛЮ АМОРТИЗАЦІЙНОЇ ПОЛІТИКИ ПІДПРИЄМСТВА

The article considers accounting and analytical support of operations with non-current assets, it is determined that high-quality accounting and analytical support affects the formation of optimal depreciation policy of a business entity. Optimization of amortization policy provides for the usage of the most effective methods of depreciation accrual depending on the intensity of use of non-current assets, and determines its crucial role in the process of recovery of non-current assets of an enterprise. The efficiency of implementation of depreciation policy is essential for formation of investment attractiveness of domestic enterprises, which is one of the main directions for attracting sources of financing. In the conditions of acute financial crisis the processes of increasing of earnings to the state budget and increasing of internal sources of funds of economic entities, needed for investment of own production activity and renewal of material and technical basis gain importance. Non-current assets have a significant specific weight in the total assets of the enterprise, they are one of the most significant objects of accounting, and requires control over their movement, the determination of depreciation, formation and use of depreciation fund, repairs, upgrading, renovation of obsolete and technically imperfect objects. In modern conditions of economic management in order to determine the features of accounting and analytical support of transactions with irreversible assets in the context of formation and control of depreciation policy, it is necessary to approach the tools of reproduction in the accounting system of the enterprise of directions of realization of depreciation policy in a theoretical and methodical way. In the course of the study methodological approaches to the organization of accounting and analytical support of operations with noncurrent assets for accrual of depreciation, formation and usage of depreciation fund are determined based on the application of complex perception, appropriate evaluation, documenting, synthetic and analytical accounting and contribute to the formation and control of the depreciation policy of the enterprise. Efficiency of depreciation policy directly depends on how balanced and reasonable the enterprise has provided for the chosen options of depreciation accrual methods conditioned by legislative requirements.

MODERN FEATURES OF DEPRECIATION POLICY OF FIXED CAPITAL OF ENTERPRISES AND BUSINESS STRUCTURES

MODERN FEATURES OF DEPRECIATION POLICY OF FIXED CAPITAL OF ENTERPRISES AND BUSINESS STRUCTURES

A Microeconomic (Vintage) Model of a Shipping Company: A Proposed Depreciation Strategy

We dealt with an important part of fixed cost, i.e., the depreciation expense in managing a shipping company owning 20 intangible fixed assets (ships), characterized by different vintages (ages), and book values. Keynes drew our attention to the importance of capital for the economy, and he dealt with the ways not only to increase it, but also to keep it in tact, through replacement. When economists tried to make Keynes dynamic, however, (known as Keynesian growth theory), they faced with the problem that not only capital’s productivity depends on capital’s vintage, but also its embodied technical progress depends on age. In shipping, we use the concept of “sister1 ship”. We used also a questionnaire on shipping depreciation filled-out by 45 Greek shipping companies. The existing theory of depreciation is, for shipping, wrong, we believe! While accountants want capital to be replaced after its death, they “condemn” shipping firms to end, prematurely, when a severe cycle occurs! Depreciation is related to gross profits, instead of to market’s conditions! Thus, we proposed an alternative shipping depreciation policy, using also an inexpensive statistical tool—a regression line—between ship age and price. When accountants etc. proposed depreciation for the first time, they ignored cycles, inflation and (shipping) depressions! We were surprised to find-out that economics … forbid “economies of scale”, when average cost exceeds marginal cost, AC > MC! Any society which wants a faster growth, has to adopt embodied technical progress, reducing both capital and labor, than hitherto, and especially capital! Moreover, Society committed the mistake to create unequal income and wealth since Keynes’s time (1936), something which re-appeared in its most grandiose form in 2019-2021, among a crisis and a pandemic, providing $13.1 trillion to just 2755 fellow citizens only, worldwide!

Effects of Exchange Rate Volatility on Economic Growth: Evidence from West African Monetary Zone

Abstract: This study examined the effects of exchange rate volatility on economic growth in four WAMZ countries. The study uses the pooled ordinary least squares, fixed effects and random effects models, and obtains a robust standard error estimate of the model by applying xtreg, cluster()fe. The empirical analysis shows that the effects of exchange rate volatility on economic growth is insignificant. The results also show a positive correlation between exports and economic growth. This implies that policies aimed at increasing exports through an appropriate exchange rate may be beneficial countries. In addition, the analysis also shows a positive and significant link between imports and economic growth rates. Therefore, this confirms that the countries actually benefit from imports resulting from the competitive pressure generated by the import of consumer goods and professional knowledge, and also from the transfer of technology embodied in the import of goods by producers. Hence, the policy of removing import barriers will benefit the countries. In addition, the results show that there is a positive correlation between the nominal exchange rate and economic growth rate. Therefore, it shows that the nominal exchange rate depreciation policy can play an important role in improving the economic growth of the countries. However, the research results show that there is an inverse relationship between the real exchange rate and economic growth. Considering the importance of the real exchange rate, this study suggests the introduction of a common currency in the WAMZ to reduce the negative effects of the real exchange rate on economic growth.

ИНВЕСТИЦИОННЫЙ МЕХАНИЗМ МАТЕРИАЛЬНО-ТЕХНИЧЕСКОГО ОБЕСПЕЧЕНИЯ СЕЛЬСКОГО ХОЗЯЙСТВА РФ

Purpose: study of the features, state and problems of the material and technical support of agricultural production, substantiation of methods and facilities for investing in the development of material and technical base (MTB) of agricultural enterprises. Materials and methods. The use of statistical and comparative analysis methods in the process of processing and interpreting the data of the Federal State Statistics Service of Russia made it possible to identify the features and trends in the reproduction of MTB of agricultural producers and to determine the directions of investment processes development in agriculture. Results. The comprehensive quantitative and qualitative analysis of the material and technical condition of agricultural enterprises is provided. The tendencies and contradictions in financing the investment needs of MTB reproduction, expressed in an increase in the cost indicators of fixed assets of agricultural enterprises with a decreasing quantitative indicators of agricultural machinery, are indicated. The financial conditions and sources of financing investments in fixed assets which made it possible to identify the dependence of investments on external sources with insignificant state financial support for agriculture have been analyzed. Conclusions. There are internal reserves for the formation of investment funds in agriculture. However, the high risks associated with the essence of agricultural production determine the fact that the investment mechanism development in the agricultural sector largely depends on the forms of state financial support for the industry. Tax incentives, depreciation policy of enterprises, the development of concessional lending and leasing, public-private partnerships in the agricultural sector are designated as tools to stimulate the investment process.

АНАЛІЗ ТА ОЦІНЮВАННЯ ЕКОНОМІЧНИХ РЕЗУЛЬТАТІВ ФІНАНСОВОЇ ПОЛІТИКИ ПІДПРИЄМСТВ АВІАЦІЙНОЇ ПРОМИСЛОВОСТІ

The article presents the results of the review and evaluation of the dynamics of economic effects from business financial policies based on the developed scientific methodological approach. A comprehensive assessment of the economic performance dynamics as an outcome of financial policy has been carried out according to the sustainability and turnover criteria for selected enterprises: SE «Antonov», LLC «Kyivaeroproekt», SE «Konotop Aircraft Repair Plant «Aviacon», SE «Lviv State Aircraft Repair Plant», SE «Kharkiv Machine-Building Plant (FED)» and PJSC «Motor Sich». The study employed integrated indicators subject to priorly defined criteria aimed at determining the deviation of the total value of the regulatory and optimizing financial tools efficiency that will enable to assessing the degree of enterprise enhancement. To evaluate the financial policy effectiveness, a methodological approach has been suggested based on the use of a hierarchical model and integrated indicator which includes basic indicators, in particular, the dynamics indicators as to the financial policy objects. The findings have revealed the objects of financial policy that need direct actions to improve the position of aviation enterprises by the criteria of sustainability and turnover. The study has also identified the key objects that urge critical changes and enhancing financial tools to manage stocks, financial assets, receivables, investments, loans, etc. Emphasis is placed on the optimization strategy and the need to build an effective depreciation policy. It is argued that the proposed methodological approach to evaluating the economic effects of the financial policy in the aviation industry will contribute to assessing its current state and adjusting the decision-making policy, as well as to modernizing the management framework and its economic effects on financial processes to boost innovation driven enterprise development.

Accelerated Depreciation Tax Credit and Corporate Financialization Based on the PSM-DID Model

In this paper, we use the data of China’s manufacturing listed companies from 2009 to 2018, adopt the method of propensity score matching and double difference (PSM-DID) to solve the sample’s selective bias, and select the accelerated depreciation policy of fixed assets issued by China in 2014 as a quasi-natural experiment to verify the robustness of the empirical results, which will affect the R&D investment of manufacturing enterprises and the structural tax reduction of China. This paper makes an empirical study on the effect of fixed asset investment to restrain the financialization of manufacturing enterprises. The results show that (1) accelerated depreciation policy of fixed assets significantly promotes the R&D investment and fixed asset investment of enterprises and reduces the level of enterprise financialization; (2) accelerated depreciation of fixed asset local tax policy, through guiding the R&D investment, fixed asset investment, and deferred income tax acquisition of enterprises. It guides the investment of enterprises to the real economic field, thus reducing the financial assets of enterprises. The investment has restrained the financial trend of real enterprises. The conclusion of this paper is of practical significance to support the formulation and implementation of the national structural tax reduction policy and to clarify the regulatory role and mechanism of the structural tax reduction policy.

Investment Support for Sustainable Development of Agricultural Enterprises in Ukraine

Abstract The article proves the need to intensify investment activities in agricultural enterprises, which is the main condition for the implementation of the principles of sustainable development. Factors that hinder investment processes and the reasons for their manifestation have been identified. The tendencies in realization of capital investments in the fixed capital of agriculture which have positive dynamics are defined, however, their insignificant reduction in 2019 was observed. The structure of sources of financing the activities of agricultural enterprises in 2019 is determined: own funds – 71.1%, loans – 14.1%, foreign investments – 14.4%, state budget funds – only 0.4% and highlights the obstacles to the formation of external and internal sources of investment. According to the results of the survey, the directions of investment activity of agricultural enterprises, restraining factors, and financial opportunities in the implementation of investment projects are determined. It is established that today, 52.7% of enterprises did not make investments that would be environmentally friendly, and only 28.2% invested in the development of social infrastructure and human capital. The main measures to intensify investment activities of agricultural enterprises are substantiated, which include: formation of elements of investment infrastructure in the region, improvement of depreciation policy at enterprises, development of public-private partnership, introduction of state programs for rural development, improvement of agricultural land lease and others.

КОНКУРЕНТОСПРОМОЖНІСТЬ ПОДАТКОВОЇ СИСТЕМИ В КОНТЕКСТІ РОЗШИРЕННЯ ФІСКАЛЬНОГО ПРОСТОРУ УКРАЇНИ

Для багатьох країн світу конкурентоспроможність податкової системи є складною проблемою, оскільки не тільки зменшує податкове навантаження на доходи підприємств, забезпечуючи активізацію факторів економічного розвитку, але й призводить до виникнення ризиків скорочення податкових надходжень і втрати стійкості державних фінансів. Податкова конкуренція вимагає знаходження компромісу між забезпеченням інвестиційних процесів і розширенням фіскального простору для вирішення актуальних соціально-економічних завдань в умовах нових глобальних викликів.Здійснено порівняльний аналіз результативності податкових реформ країн ЄС та України, спрямованих на зменшення податкового навантаження на бізнес та підвищення рівня конкурентоспроможності податкових систем. Попри успішність реформ у країнах ЄС, в Україні виявлено їх низьку результативність щодо впливу на інвестиційні процеси і створення умов для зменшення тіньової економіки. Визначено, що податкові реформи в Україні проводилися без урахування специфічних ефектів зміни умов оподаткування доходів підприємств, зокрема, впливу зниження ставок податків на рівень податкових надходжень у середньо- та довгостроковій перспективі, активізацію інноваційно-інвестиційної діяльності, динаміку інвестицій за межі країни, процеси детінізації економіки; тощо. Доведено, що пріоритетним напрямом підвищення міжнародної податкової конкурентоспроможності України має бути не зниження податкових ставок і скорочення податкових обмежень витрат при формування податкової бази з податку на прибуток підприємств, а вдосконалення амортизаційної політики в частині забезпечення прискорення відшкодування вартості основних засобів і нематеріальних активів, стимулювання капітальних інвестицій в оновлення виробництва на інноваційній основі. Обґрунтовано, що розвиток податкової системи України (інших країн з малою, відкритою економікою, з високим рівнем корупції та тіньової економіки) має відбуватися в рамках цілісної концепції сталого розвитку, з урахуванням можливих наслідків бюджетних рішень як для поточних, так і для довгострокових бюджетів, що стосуватимуться майбутніх поколінь.

Analytical Generalization of the Depreciation Multiplier as a Factor of Extended Reproduction of Fixed Assets Depending on the Age Structure

The subject of the study is the expansion multiplier as a quantitative characteristic of the depreciation expansive effect in models of the extended reproduction of fixed assets. The aim of the study is to identify the impact of the age structure of fixed assets on the expansion multiplier value factoring in various methods of calculating depreciation. The research methods include mathematical and computer modelling, as well as deductive logic as a process of reasoning from more general to more specific. The high depreciation of fixed assets of Russian enterprises and the high demand for depreciation as a source of funds for their renewal and extended reproduction ensure the relevance of the study. The results of the study include the models of extended reproduction of fixed assets due to the expansive depreciation effect using various methods of accruing depreciation; demonstrate the relationship between the age structure of fixed assets and the expansion multiplier. Generalizing the methods of depreciation in terms of their impact on the expansion multiplier values provides the scientific novelty of the research. This paper introduces the expansion multiplier calculation formulas for general and special accelerated depreciation and limits of multiplicative potential of accelerated depreciation. The conclusions of the research work illustrate the possibility of using the expansion multiplier to plan and optimize the depreciation policies of organizations, as well as to evaluate the multiplier of fixed assets in various economies. The authors identified the problems of applying the expansive depreciation effect as a means of extended reproduction of fixed assets in practice, as a result of the limitations of its theoretical models. In overcoming the identified limitations, areas of technical theoretical research are proposed.

Toward a Three-Sectoral Reproduction Model of Fixed Capital Depreciation and Investment-Driven Economic Growth: Theory and Policy Simulations from Chinese Input-Output Data

The accelerated depreciation policy on fixed assets is a representative tax reduction policy in China. However, it is rarely systematically studied on the macro-level. This paper builds a general model for analysing accelerated depreciation. It uses China's input-output data (1987-2015) to test and quantify the role of accelerated depreciation in promoting economic growth under different asset structures. The results show that accelerated depreciation with investment has a positive effect on economic growth. It becomes more significant as the depreciation period shortens, and is also limited by the asset structure. This paper discusses the possible situations in which tax incentives are not used for investment, and finds that shortening the depreciation period leads to a negative adjustment in economic accounting. This effect has a depreciation turning point where the rate of change increases sharply; this corresponds with the minimum depreciation period for accelerated depreciation in real terms. This paper proposes a method of estimating the depreciation turning point, and calculates the minimum weighted average of the accelerated depreciation period in China (1987-2015), thus providing effective proposals for the formulation and implementation of related economic policies.

Control y contabilización de activos fijos y su incidencia en la toma de decisiones administrativas

El estudio se plantea como objetivo elaborar un sistema de gestión integral de control y contabilización de activos fijos que permita la acertada toma de decisiones financieras en la Universidad Católica de Cuenca. Fue de tipo descriptivo con diseño de campo no experimental. El 45,2% de los encuestados aseguran que la información que reporta el programa empleado para registrar los bienes es adecuada, sin embargo, el 54,8% considera que la información no es fiable. La propuesta planteada, permitirá mejorar el ordenamiento y control de los activos fijos de la Universidad Católica de Cuenca, ya que se optará por la valuación de activos fijos a valor razonable, se revisará de forma permanente la vida útil, políticas depreciatorias, y el deterioro; así se mejorará los procesos internos a través de la integración de información en el sistema ERP, posibilitando una acertada toma de decisiones a nivel estratégico, táctico y operativo.

Divergence within IFRS adoption: the case of depreciation practices of listed banks in Bangladesh

Comparability is one of the qualitative characteristics of financial statements that are prepared in compliance with the International Financial Reporting Standards (IFRS). The objective of this research is to identify whether this qualitative characteristic can be negated even when entities apply IFRS. In achieving the research objective, the depreciation policies adopted by the listed banks in Bangladesh are identified and compared with each other. This research finds that despite increasing effort by accounting standard setters and pressure groups to achieve IFRS-compliance and harmonization in accounting practices, non-compliance and divergence still exists. This research also finds that the divergence in depreciation practices can be of enough significance to negate comparability. The findings of this research expected to assist the international and national standard setters as well as the regulators in understanding the practical issues in implementing accounting standards and developing clearer IFRS implementation guidelines.

Determinants of Diversification from Oil Sector in Saudi Arabia

Saudi Arabia targets diversification policy in the Vision 2030. This study estimates the production, exports, government revenue, investment and employment diversification indices and also finds its determinants. Increasing inflation promotes the production and export diversification and depresses the investment, government revenue and employment diversification. The depreciation policy encourages the government revenue diversification and reduces investment and employment diversification. Foreign Direct Investment (FDI) improved the government revenue diversification and weakens the export diversification. Economic growth stimulates the government revenue, employment and export diversification and slow down the production and investment diversification. Government spending improves the production and investment diversification and dampens the government revenue and exports diversification. Capital formation promotes the export diversification and reduces the government revenue and employment diversification. Money supply diminishes the investment, government revenue, exports and employment diversification. Subsidies expand production diversification and contract the government revenue diversification. Trade openness lifts up the investment and employment diversification and reduces the government revenue diversification.Keywords: diversification, exports, government revenue and spending, money supply JEL Classifications: L25, B17, E62, E52DOI: https://doi.org/10.32479/ijeep.9709

DETERMINANTS OF DIVERSIFICATION FROM OIL SECTOR IN SAUDI ARABIA

Saudi Arabia targets diversification policy in the Vision 2030. This study estimates the production, exports, government revenue, investment and employment diversification indices and also finds its determinants. Increasing inflation promotes the production and export diversification and depresses the investment, government revenue and employment diversification. The depreciation policy encourages the government revenue diversification and reduces investment and employment diversification. Foreign Direct Investment (FDI) improved the government revenue diversification and weakens the export diversification. Economic growth stimulates the government revenue, employment and export diversification and slow down the production and investment diversification. Government spending improves the production and investment diversification and dampens the government revenue and exports diversification. Capital formation promotes the export diversification and reduces the government revenue and employment diversification. Money supply diminishes the investment, government revenue, exports and employment diversification. Subsidies expand production diversification and contract the government revenue diversification. Trade openness lifts up the investment and employment diversification and reduces the government revenue diversification.Keywords: diversification, exports, government revenue and spending, money supply JEL Classifications: L25, B17, E62, E52DOI: https://doi.org/10.32479/ijeep.9709

Tax Compliance and Investment Incentives: Firm Responses to Accelerated Depreciation in China

We evaluate the effects of a Chinese accelerated depreciation policy that occurred in 2014 on firm investment. We present three findings. First, on average, the policy increased firms’ investment in eligible capital, especially the purchase of equipment and machines. Second, the policy effects are stronger for larger firms, firms with more cash, and firms with better access to finance, which tend to be less financially constrained but have better tax compliance. Third, the effect magnitude increases with imputed county tax enforcement but decreases with provincial tax fraud rate. These results shed light on the importance of improving tax compliance in making tax incentives effective.

Studying the impact of the depreciation policy on the development of innovation potential of industrial enterprises

Studying the impact of the depreciation policy on the development of innovation potential of industrial enterprises

STATE REGULATION OF THE REPRODUCTION OF FIXED CAPITAL

Introduction. Today, the Ukrainian economy is in a recession. Therefore, the need for government intervention in the socio-economic development of the economy is relevant. This measure is designed to stabilize the activities of economic agents that can produce innovations and improve the quality and standard of living of the Ukrainian population. This activity requires coherent coordination of economic entities on issues of capital accumulation. The purpose of the research is to analyse the tools used by the state for the regulation of fixed capital reproduction. In carrying out the study, methods of retrospective analysis, generalization, comparison, and content analysis were used. Results. The result of the study is the reproduction ways development of fixed capital. The proposed list of state regulation instruments, which is aimed at accelerating the investment development of the Ukrainian economy, should be considered as the scientific novelty. Only in this case is it possible to renew production capital. The practical significance of the research results lies in their possible use in the formation of the state amortization policy. Prospects for further research are the development of depreciation policies for the economy sectors and the creation of reserves for innovative development. Stimulating the modernization process will increase the share of new capacities, which, respectively, will lead to an increase in their use and to an increase in the efficiency of domestic industrial production. Conclusions. A radical renewal of the production potential of Ukraine is possible only if the following conditions are met: a consistent state policy to improve the investment climate, reduce investment risks, create stable conditions for economic and investment activity, strengthen the investment potential of modern domestic enterprises and accelerate the investment development of the Ukrainian economy. Keywords: depreciation policy, investment development, fixed capital, state regulation, reproduction.